Press Release: Statements of SEC Chairman Christopher Cox and Chief Accountant Conrad Hewitt Regarding PCAOB's Proposed Section 404 Auditing Standard; 2006-213; Dec. 19, 2006
No fraud occurred; the SEC and PCAOB proposed a revised Section 404 auditing standard to replace the costly Auditing Standard No. 2 with a more efficient, risk-based approach that benefits smaller companies while enhancing investor protection.
The Public Company Accounting Oversight Board (PCAOB) proposed a new auditing standard to supersede Auditing Standard No. 2 under Section 404 of the Sarbanes-Oxley Act, aiming to reduce inefficiencies and costs in internal control audits. SEC Chairman Christopher Cox and Chief Accountant Conrad Hewitt endorsed the proposal, emphasizing its scalability for smaller public companies and its alignment with the SEC’s interpretative guidance for management. No fraud, charges, or financial penalties are involved—this is a regulatory reform designed to improve audit effectiveness without compromising investor protection.
The Public Company Accounting Oversight Board (PCAOB) proposed a revised auditing standard for Section 404 of the Sarbanes-Oxley Act, intended to replace the previously criticized Auditing Standard No. 2. SEC Chairman Christopher Cox and Chief Accountant Conrad Hewitt publicly praised the proposal as a positive step toward making internal control audits more efficient, cost-effective, and risk-focused, particularly benefiting smaller public companies. The new standard was designed to be scalable and to align with the SEC’s accompanying interpretative guidance for management, ensuring a coordinated regulatory approach. No allegations of fraud, misconduct, or financial penalties were involved, as this was a forward-looking regulatory reform rather than an enforcement action. The SEC encouraged companies, audit firms, investors, and other stakeholders to submit public comments during the overlapping comment periods for both the PCAOB’s standard and the SEC’s guidance. The goal was to refine the implementation of Section 404 to strengthen investor protection without imposing undue burdens. This initiative reflected a collaborative effort between the SEC and PCAOB to improve the quality and efficiency of financial reporting oversight. The proposal marked a significant shift in regulatory philosophy, prioritizing practicality and proportionality in audit requirements.
Extracted insights
- agency chairman, u.s. securities and exchange commission
- agency chief accountant, u.s. securities and exchange commission
- person christopher cox
- person conrad hewitt
- agency sec and pcaob
- person welcome development
- PCAOB voted to propose new auditing standard for audits of registrants' internal control over financial reporting under Section 404 of Sarbanes-Oxley Act
- PCAOB would supersede PCAOB's Auditing Standard No. 2
- Christopher Cox is Chairman, U.S. Securities and Exchange Commission
- Conrad Hewitt is Chief Accountant, U.S. Securities and Exchange Commission
- PCAOB's proposal would repeal unduly expensive and inefficient auditing standard under Section 404 of Sarbanes-Oxley
- SEC and PCAOB have worked together to ensure Commission's proposed interpretative guidance and PCAOB's proposed auditing standard are mutually reinforcing
- Smaller public companies should benefit from scalability built into these proposals
- PCAOB's proposed auditing standard is welcome development
Statements of SEC Chairman Christopher Cox and Chief Accountant Conrad Hewitt Regarding PCAOB's Proposed Section 404 Auditing Standard FOR IMMEDIATE RELEASE 2006-213 Washington, D.C., Dec. 19, 2006 - The Public Company Accounting Oversight Board (PCAOB) today voted to propose a new auditing standard for the audits of registrants' internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, which, if adopted by the PCAOB and approved by the Commission, would supersede the PCAOB's Auditing Standard No. 2. Christopher Cox, Chairman, U.S. Securities and Exchange Commission, said, "The PCAOB's proposal to repeal the unduly expensive and inefficient auditing standard under Section 404 of Sarbanes-Oxley — and to replace that standard with one that strengthens investor protection by refocusing resources on what truly matters to the integrity of financial statements — is an exceptionally positive step for both investors and for America's capital markets. The SEC and the PCAOB have worked together to ensure that the Commission's proposed interpretative guidance for management and the PCAOB's proposed new auditing standard are mutually reinforcing. Together, these proposals should significantly improve the implementation of Section 404, making it more efficient and effective. Smaller public companies should particularly benefit from the scalability built into these proposals. We look forward to considering the public comments on these proposals." Conrad Hewitt, Chief Accountant, U.S. Securities and Exchange Commission, added, "The PCAOB's proposed auditing standard is a welcome development, and we look forward to reviewing it carefully. We encourage companies, audit firms, investors and any other interested parties to comment on both the PCAOB's proposed auditing standard and the Commission's proposed interpretative guidance for management during the proposals' overlapping comment periods. We will consider all of these comments carefully before making any recommendations to the Commission." http://www.sec.gov/news/press/2006/2006-213.htm Home | Previous Page Modified: 12/19/2006
Statements of SEC Chairman Christopher Cox and Chief Accountant Conrad Hewitt Regarding PCAOB's Proposed Section 404 Auditing Standard FOR IMMEDIATE RELEASE 2006-213 Washington, D.C., Dec. 19, 2006 - The Public Company Accounting Oversight Board (PCAOB) today voted to propose a new auditing standard for the audits of registrants' internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, which, if adopted by the PCAOB and approved by the Commission, would supersede the PCAOB's Auditing Standard No. 2. Christopher Cox, Chairman, U.S. Securities and Exchange Commission, said, "The PCAOB's proposal to repeal the unduly expensive and inefficient auditing standard under Section 404 of Sarbanes-Oxley — and to replace that standard with one that strengthens investor protection by refocusing resources on what truly matters to the integrity of financial statements — is an exceptionally positive step for both investors and for America's capital markets. The SEC and the PCAOB have worked together to ensure that the Commission's proposed interpretative guidance for management and the PCAOB's proposed new auditing standard are mutually reinforcing. Together, these proposals should significantly improve the implementation of Section 404, making it more efficient and effective. Smaller public companies should particularly benefit from the scalability built into these proposals. We look forward to considering the public comments on these proposals." Conrad Hewitt, Chief Accountant, U.S. Securities and Exchange Commission, added, "The PCAOB's proposed auditing standard is a welcome development, and we look forward to reviewing it carefully. We encourage companies, audit firms, investors and any other interested parties to comment on both the PCAOB's proposed auditing standard and the Commission's proposed interpretative guidance for management during the proposals' overlapping comment periods. We will consider all of these comments carefully before making any recommendations to the Commission." http://www.sec.gov/news/press/2006/2006-213.htm Home | Previous Page Modified: 12/19/2006